Steel scarcity: Real or invented?

MUMBAI: The scarcity of steel in the domestic market has set off a relentless war of words between the country’s integrated steel manufacturers and the cold rollers.

The integrated steel producers claim that the scarcity is “man-made” and has led to unregulated imports, creating a surplus of almost 5 million tonnes of flat steel in the domestic market. This has created a sup-ply glut, say the bigger companies, represented by Indian Steel Alliance (ISA).

On the other hand, Cold Rolled Steel Manufacturers Association of India (CORSMA) has accused the bigger players of jacking up domestic prices of hot rolled steel. They have asked the government to cut import duty to increase the supply of steel in the domestic market.

Interestingly, the figures quoted by the two sides differ. The integrated steel companies claim that 3.6 million tonnes of flat steel was imported till March this year. “Thus while the annual demand is about 19 million tonnes, the supply is almost 24 million tonnes,” a senior industry official had told ET.

Immediately after the report was published, CORSMA wrote to the ministry of steel, accusing ISA for “wrong assumptions”. According to the association, only 360,000 tonnes of steel was imported last year.

“There is a clear gap between supply and demand,” said a CORSMA official. “Steel production in the country rose by 8.8% till May this year whereas consumption grew by 11.6%. Last year itself, the scar-city of hot rolled coils in the country amounted to 1.4 million tonnes. Moreover, supply of flat steel fell short by about 1.5 million tonnes,” he adds.

Lack of access to statistics means that neither of the claims can be verified. Statistics collected by Joint Plant Committee, formed in 1964 to promote the industry, are yet to be made available to the public. To make matters worse, the government is yet to wake up to address the rift.

However, observers point out at the real problem facing the industry. “The basic issue here is the scarcity of steel in the domestic market. Even if one goes by the figures quoted by the steel industry (where supply barely meets the demand), it is apparent that steel production is yet to take off,” said an industry analyst.

Little wonder that the cold rollers have been asking for a reduction in the Customs duty on imports of hot rolled coils from the present 5% to 2% per tonne. They have even proposed levying a duty of 10% per tonne of exports “to improve domestic supplies as done by other countries, including China and the US”. Asks the CORSMA official: “If they can have duty on iron ore exports, then why not on steel?”

It is anyone’s guess that the suggested solution won’t be to the liking of the integrated players. Instead, says a senior steel official: “The only realistic way to increase supply is to increase production, which will be possible only if all the planned projects take off as soon as possible.”

Few of the hundreds of MoUs signed by private companies with Orissa, Jharkhand and Chhattisgarh have taken off. Among the big-tickets one, only the Orissa projects of Tata Steel and South Korean Posco have seen some progress.The Centre has finally accepted the problem and has formed an inter-ministerial group to look into the issues related to these investments. The group will include ministries of steel, mines, environment and railways.

The brownfield capacity expansion by the companies would not be enough to keep up with the demand for steel, especially keeping in mind the growth of sectors like auto, construction and white goods. These sectors are the main consumers of steel. A permanent solution to the scarcity is capacity addition.

(This article was originally published in The Times of India)

0Comments

Are you a Business Owner? Get Your Free Business Listing on Economic Times.